The Number That Matters At Nokia: Watch The Cash

Jan 10, 2013 11:19 am ET

Bloomberg

By Sven Grundberg

Nokia pre-empted earnings with a rosy portrait of smartphone demand and other parts of its business, but there is still reason to tune in when the company issues its fourth quarter results on January 24.

Among the most critical issues for Nokia, not mentioned in Thursday’s news release, is the company’s financial position.

Nokia’s pile of cash has been shrinking ever since its Canadian-born Chief Executive Stephen Elop announced his bold move to adopt Microsoft’s untested operating system for future devices. The shrinking cash pile has caused serious concern about the company’s long term prospects.

By the end of September last year, Nokia’s net cash position reached €3.6 billion, down from €4.2 billion at the end of June, and down from €7 billion when Mr. Elop became the company’s chief executive in late 2010. The company’s costly strategy overhaul has led to a series of credit downgrades from the three major credit-rating firms, all of whom have cut Nokia’s debt rating to junk.

Scrambling to raise cash and cut costs amid deepening losses, Nokia recently raised €170 million by selling its suburban-Helsinki headquarter building to Finnish property investor Exilion Capital Oy and agreeing to lease it back on a long-term basis. The deal, which Nokia first said it was pursuing in October, followed an earlier move to raise €750 million in a bond offering.

The company has also been selling patents and divesting itself of parts of its business, including an optical-network unit sold last month by its Nokia Siemens Networks arm, as well as the Vertu luxury phone unit, bought by a Swedish private equity firm for an undisclosed sum last year.

So even if Nokia seems to be on track to halt its declining smartphone sales, the road ahead is long, steep and slippery. Therefore cash is likely to be the key topic as Nokia discloses the whole enchilada in two weeks time.

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